What the Form Is For

Schedule D (Form 1040) is the IRS form you use to report profits and losses from selling investments and other capital assets during 2019. Think of it as the summary sheet where all your buying and selling activity gets tallied up to determine whether you owe taxes on your gains or can claim deductions for your losses.

You'll need Schedule D to report sales of stocks, bonds, mutual funds, real estate (that isn't your primary home), cryptocurrency, and other investments. The form distinguishes between “short-term” transactions (assets you owned for one year or less) and “long-term” transactions (assets held for more than one year), because the IRS taxes these differently. Short-term gains are taxed at your regular income tax rate (up to 37% in 2019), while long-term gains receive preferential rates of 0%, 15%, or 20%, depending on your total income.

Schedule D works hand-in-hand with Form 8949, which is where you list each individual transaction with details. Form 8949 is like your itemized receipt, while Schedule D is where you add everything up and calculate your final tax bill. You'll also use Schedule D to report capital gain distributions from mutual funds, carryover losses from previous years, and gains from partnerships or S corporations. IRS.gov

When You’d Use Schedule D (Late/Amended)

The original deadline for filing your 2019 tax return (including Schedule D) was April 15, 2020 (extended to July 15, 2020, due to COVID-19). If you filed for an extension, your deadline was October 15, 2020. But what if you made mistakes or forgot to report transactions?

If you discover errors on your 2019 Schedule D after filing, you'll need to file Form 1040-X (Amended U.S. Individual Income Tax Return). You generally have three years from the date you filed your original return or two years from when you paid the tax (whichever is later) to amend your return and claim a refund. For most 2019 filers, this means the amendment deadline was April 15, 2023 (or July 15, 2023, if you filed under the COVID extension). IRS.gov

Common reasons to amend include: discovering you forgot to report stock sales shown on a Form 1099-B, realizing you incorrectly calculated your basis (what you originally paid), or finding out you're eligible for an exclusion you didn't claim. The good news is the IRS automatically corrects simple math errors, so you don't need to amend just for arithmetic mistakes. However, if you omitted entire transactions or used the wrong cost basis, filing an amended return is essential to avoid penalties. IRS.gov

Key Rules for 2019

Several important rules governed Schedule D in the 2019 tax year:

Tax Rates

Short-term capital gains were taxed as ordinary income at rates from 10% to 37%. Long-term capital gains received preferential treatment: 0% if your taxable income was up to $39,375 (single) or $78,750 (married filing jointly); 15% for income between those amounts and $434,550 (single) or $488,850 (married filing jointly); and 20% for income above those thresholds.

Loss Limitations

If your capital losses exceeded your gains, you could deduct up to $3,000 ($1,500 if married filing separately) against your ordinary income. Any excess losses carry forward to future years indefinitely. This prevents you from using huge investment losses to wipe out all your employment income in a single year.

Wash Sale Rule

You couldn't claim a loss if you sold a security at a loss and bought “substantially identical” securities within 30 days before or after the sale. This prevents taxpayers from gaming the system by selling losing stocks for the tax deduction, then immediately buying them back.

Holding Period

Your holding period begins the day after you acquire an asset and includes the day you sell it. This determines whether your gain or loss is short-term or long-term, which dramatically affects your tax rate.

Form 8949 Requirement

For 2019, you were required to complete Form 8949 before filling out Schedule D for most transactions. This reconciliation form ensures the amounts you report match what brokers reported to the IRS on Form 1099-B. IRS.gov

Step-by-Step (High Level)

Here's how to complete Schedule D for 2019:

Step 1: Gather Your Documents

Collect all Forms 1099-B from brokers, Forms 1099-S for real estate sales, and your own records showing purchase dates and costs. Make sure you have documentation for cryptocurrency transactions, which count as capital assets.

Step 2: Complete Form 8949

List each transaction separately on Form 8949, Part I for short-term sales (one year or less) and Part II for long-term sales (more than one year). Include the description, dates acquired and sold, proceeds (sales price), cost basis, and any adjustments. Check the appropriate box at the top (A, B, or C for short-term; D, E, or F for long-term) based on whether your broker reported the basis to the IRS.

Step 3: Transfer Totals to Schedule D

Add up all your Form 8949 transactions and transfer the totals to Schedule D. Short-term totals go to Part I (lines 1-7), and long-term totals go to Part II (lines 8-15). Don't forget to include capital gain distributions from mutual funds (line 13) and any carryover losses from 2018 (lines 6 and 14).

Step 4: Calculate Net Gain or Loss

Combine your short-term and long-term results in Part III (lines 16-17). If you have a net gain, you may need to complete additional worksheets to calculate your tax at preferential rates. If you have a net loss, you can deduct up to $3,000 against ordinary income.

Step 5: Attach to Form 1040

Include the completed Schedule D with your Form 1040 and follow the instructions to enter the final amount on the appropriate line of your main tax return. IRS.gov

Common Mistakes and How to Avoid Them

Mistake #1: Incorrect Cost Basis

Many taxpayers forget to include brokerage commissions, reinvested dividends, or stock splits when calculating basis. This leads to overpaying taxes. Solution: Keep detailed records of all transactions, including dividend reinvestments, which increase your basis and reduce taxable gains.

Mistake #2: Wrong Holding Period

Confusing short-term and long-term status costs thousands in extra taxes. Remember, you must hold an asset for more than one year for long-term treatment—exactly one year counts as short-term. Solution: Count carefully and use a calendar. The holding period begins the day after purchase.

Mistake #3: Not Reporting Wash Sales

Brokers report wash sales on Form 1099-B, but if you made the disallowed transaction across different brokerage accounts, you must identify and report it yourself. Solution: Track your trades across all accounts and postpone repurchasing similar securities for at least 31 days after selling at a loss.

Mistake #4: Forgetting Form 8949

Some taxpayers try to complete Schedule D without Form 8949, especially if they have simple transactions. For 2019, the IRS required Form 8949 for virtually all individual transactions. Solution: Always complete Form 8949 first; it's mandatory even if your broker reported everything correctly.

Mistake #5: Missing Transactions

Failing to report sales shown on Form 1099-B triggers IRS computer matching and potential penalties. Solution: Wait until you receive all tax documents (brokers must mail them by February 15) and carefully cross-reference your records. Report everything, even if you had no gain or a loss—the IRS knows about it.

Mistake #6: Ignoring Cryptocurrency

Virtual currencies like Bitcoin are property, not currency, for tax purposes. Every sale or exchange—even buying coffee with Bitcoin—is a taxable event. Solution: Track every crypto transaction with specialized software if needed, and report on Form 8949. IRS.gov

What Happens After You File

Once you submit Schedule D with your 2019 return, the IRS runs automated matching programs comparing your reported transactions to the Forms 1099-B that brokers submitted. If everything matches, your return processes normally—typically within 21 days for e-filed returns or 6–8 weeks for paper returns.

If there's a discrepancy, you might receive a CP2000 notice proposing additional tax based on unreported income. This isn't technically an audit, but an “underreporter inquiry.” You'll have an opportunity to explain the difference (perhaps you reported a transaction in a different year or had valid adjustments) or agree and pay the additional tax.

For returns showing a large capital gain, the IRS might flag it for examination, though most Schedule D returns aren't audited. Keep all supporting documents—brokerage statements, purchase confirmations, and Form 8949 worksheets—for at least three years from the filing date. If you underreported gross income by more than 25%, the IRS has six years to audit; for fraud, there's no time limit.

If you're owed a refund based on capital losses offsetting other income, expect your refund within the normal timeframe. However, claiming large carryover losses from prior years might slow processing as the IRS verifies continuity. IRS.gov

FAQs

Q1: Do I have to file Schedule D if my only capital transactions were mutual fund distributions reported on Form 1099-DIV?

A: Not necessarily. If you only received capital gain distributions (shown in box 2a of Form 1099-DIV) and had no other capital transactions, you can report these directly on Form 1040, line 6, without filing Schedule D. However, if the distributions include collectibles gains (box 2d) or section 1250 gains (box 2b), you'll need Schedule D for proper tax calculation.

Q2: Can I deduct the full loss if I lost money on investments in 2019?

A: You can deduct capital losses up to your capital gains, plus an additional $3,000 against ordinary income ($1,500 if married filing separately). If your losses exceed this limit, carry the excess forward to future years. There's no expiration—you can keep carrying losses forward until they're fully used.

Q3: What if I inherited stock in 2019 and sold it—is that short-term or long-term?

A: Inherited property receives automatic long-term treatment regardless of how long you actually held it. This means you qualify for the preferential long-term capital gains tax rates. Your basis is generally the fair market value on the date of death (called “step-up in basis”), which often results in little or no taxable gain.

Q4: I received a Form 1099-B showing a much higher gain than I actually made. What do I do?

A: This often happens when brokers don't have your complete cost basis information, especially for older stocks or transfers from other brokers. Report the sale on Form 8949 using the correct basis from your records, and use code “B” in column (f) to indicate a basis adjustment. Show the difference between what the broker reported and your actual basis as a negative number in column (g). Keep excellent documentation in case of IRS questions.

Q5: Can I avoid capital gains taxes by donating appreciated stock to charity?

A: Yes, this is a powerful strategy, though it doesn't directly involve Schedule D. When you donate appreciated long-term stock to a qualified charity, you can generally deduct the full fair market value on Schedule A (if you itemize) without paying capital gains tax on the appreciation. The stock simply doesn't appear on Schedule D if you donate it rather than sell it.

Q6: What happens if I missed reporting a stock sale on my 2019 return and it's now too late to amend?

A: The IRS may still send you a CP2000 notice even years later. The three-year amendment deadline only applies to claiming refunds; the IRS can assess additional taxes within three years (or longer if there's substantial underreporting). If you discover an unreported gain after the amendment period, you might consider filing a late amendment anyway to demonstrate good faith and potentially reduce penalties.

Q7: How do I know if my investment is short-term or long-term if I bought shares at different times?

A: This requires identifying which specific shares you sold. If you didn't specify which shares to sell, the IRS uses “first in, first out” (FIFO) accounting—the oldest shares are considered sold first. However, you can specify particular shares at the time of sale (tell your broker “sell the 100 shares I bought on March 15, 2018”), which gives you control over whether the gain is short-term or long-term. IRS.gov

For More Information: Visit IRS.gov/ScheduleD for the official forms, instructions, and Publication 550 (Investment Income and Expenses) for detailed guidance on reporting capital gains and losses.